Federal contractors with contracts of at least $100,000 are required to use E-Verify, the Internet-based system operated by the Department of Homeland Security (DHS) in partnership with the Social Security Administration (SSA) that allows employers to electronically verify the employment eligibility of their newly hired employees.

The requirement goes into effect Sept. 8, following the denial by a federal district court in Maryland of a challenge by the U.S. Chamber of Commerce and other employer groups concerning the validity of the rule, according to a report published by the law firm of McGuireWoods (www.mcguirewoods.com). The final rule covers most companies that contract with the federal government to provide goods and services (including companies receiving American Recovery and Reinvestment Act funds).

With some exceptions, covered employers include those with prime federal contracts:

• Awarded on or after September 8, 2009;

• Having a value of at least $100,000; and

• With a performance period of at least 120 days.

The size of the contracting entity does not matter. E-Verify requirements also generally cover subcontracts with a value of $3,000 or more for services or construction flowing from covered prime contracts (again, with some exceptions).

The rule exempts:

• Commercially available off-the-shelf (COTS) items;

• Items that would be COTS but for minor modifications; and

• Bulk cargo.

Covered contractors must use E Verify to confirm the status of:

• All new workers hired during the term of the covered contract, whether or not they are assigned to work on the federal contract or subcontract;

• All existing workers assigned to work on the contract or subcontract and who are not exempt. An employee is not considered directly to be performing duties under a contract if he or she normally performs “support work, such as indirect or overhead functions” and “does not perform substantial duties applicable to the contract;”

• State or local governments, institutions of higher education, recognized Indian Tribes and sureties performing under a takeover agreement entered into with a federal agency under a performance bond only have to use E Verify for employees assigned to the contract or subcontract, whether new hires or existing employees.

A covered contractor also may elect to verify all employees hired after November 6, 1986, who are working in the United States, rather than limiting verification to individuals working on federal contracts.

The Department of Homeland Security is offering free webinars on the new rule (select the “FAR E-Verify” topic on the online registration form).

For further information on E-Verify go to  http://tiny.cc/everify289.